Plus: Circle K wants to go global. August 26, 2024 Sign Up | View online IN THIS ISSUE 7 min read 🥳 Rate relief 🎧 Podcaster paydays 💥 Retirement wreckers “Strange things are afoot at the Circle K,” Keanu Reeves declares in the 1989 cinematic masterpiece Bill & Ted's Excellent Adventure. Currently, there’s a lot of acquisition-related things afoot at the Circle K, as we explain below. | Orion Pictures THE WEEK IN MARKETS The Time Has Come The most exciting place in the universe last week? In our view, it was not the DNC or the Canadian railways’ negotiating room, but the Jackson Hole Economic Symposium. The annual economic conference is usually a dry affair. Not this year! Because the headliner was U.S. Fed chairman Jerome Powell, aka the guy who will decide when the U.S. central bank will finally cut interest rates. The financial world was hoping Powell would answer some questions, like: When are rate cuts coming? How large will they be? And did the Fed, in waiting to cut, put the economy on a recession course? On Friday, Powell offered some answers. He said that, with inflation trending toward “our 2% objective,” “the time has come” for cuts. He didn’t offer a timeline, but investors suspect the first cut will come at the Fed’s next meeting, in September. He didn’t say how large the cut would be, either (investors think 1% by the end of 2024). But the major stock markets rallied anyway: TSX hit an all-time high, and the S&P 500 closed within 1% of a new record. WHAT HAPPENED LAST WEEK IMPORTANT Canada’s convenience-store giant wants to go global. Couche-Tard, Canada’s most valuable retailer and the owner of Circle K, submitted an undisclosed offer to acquire the parent company of Japan’s beloved 7-Eleven chain. The deal is one of the biggest in convenience-store history, and if it goes through, Couche-Tard would become the undisputed global king of convenience stores, with around 100,000 locations worldwide and a $100 billion or so market cap. Couche-Tard has become plus grand thanks to a Berkshire-style strategy: it acquires well-run, quality-conscious chains, like Esso, and then makes them better by adding (relatively) higher-end food and coffee. And 7-Eleven, with its souped-up espresso stations and “Take it to Eleven” reputation, fits right in. The catch is that the deal will likely face regulatory scrutiny, like some past Couche-Tard acquisition attempts. INTERESTING Now call her sugar daddy. SiriusXM just pried away wildly popular (and, fair warning, pretty risqué) Call Her Daddy podcaster Alex Cooper from Spotify with a three-year US$125 million deal. That’s more than double what Spotify has been paying her since 2021. The agreement underscores the degree to which podcasting has become a business built around a handful of monster hits. There are some 450,000 active podcasts, but the top 25 shows get nearly half of all weekly U.S. listens. Which helps to explain why Cooper and top-ranked Joe Rogan are making second-yacht money while lower-profile shows are fighting for pennies and cutting staff. Should investors worry about the baby bust? Yes, argued Bloomberg Opinion’s John Authers in a compelling (and paywalled, sorry) column. Not a single developed country is meeting the replacement level of 2.1 births per woman (Canada: 1.4); ditto China and India. Authers argues that investors should take note because fewer babies will mean fewer workers and fewer customers, and that could hurt profits since companies might struggle to grow sales and keep costs down. Interestingly, he mentions that 50 years ago, economists worried (too much, in retrospect) about overpopulation. Which raises a point Authers doesn’t make: it’s hard to predict what society will look like in the future and the implications for profits, which is why long-term, slow-moving trends often seem like they should matter more for markets than they do. —Abigail Covington & Srivindhya Kolluru FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT 🎃 In perhaps the least expected effect of climate change, the Pumpkin Spice Latte is returning to Starbucks early this year. Source 🌋 Russian volcano erupts after huge offshore earthquake. Kremlin charges both with conspiracy. Source 🍼 Ontario woman starts Grandma Babysitting Club for kids without daycare. Swears it’s not a ploy to get rid of old candy. Source 🏠 Saskatchewan town offering $30,000 to anyone who builds a house there. Almost enough to heat it this winter. Source CRASH & BURN TO THE MOON ✈️ Boeing pauses tests on 777x aircraft after discovering structural problems. Say they’ve pretty much nailed the snack mix, though. Source 🍔 McDonald’s Instagram was hacked, but don’t worry, Mayor McCheese will still get your DM. Source 🚦 Ottawa trying to collect $16 million in red light camera, photo radar fines. Drivers want reshoots with better lighting. Source ❄️ About 126 pounds of cocaine washed up on Florida shores during Hurricane Debby. Floridians too high on ketamine to collect it. Source WHO CARES WHAT’S UP THIS WEEK Nvidia reports earnings (Wednesday) and profit expectations are once again sky-high — as in, about 2x what they were this time last year. Pop some popcorn. THE BIG IMPORTANT STORY INVESTING Five Surefire Ways to Wreck Your RRSP The New York Times recently ran a story about the three biggest mistakes investors can make with a 401(k), which is the U.S. equivalent of the Registered Retirement Savings Plan (RRSP) — its Don Henley to our Neil Young, you might say, or perhaps its Channing Tatum to our Ryan Gosling. Anyway, some of the Times’ advice translates north of the border, but not all of it does, so we compiled five (take that, NYT) Canada-specific, self-inflicted RRSP errors to avoid. 1. Not using your RRSP. Data shows that only about 20% of Canadian adults contribute to an RRSP. That’s a shame because with RRSPs, unlike other investment accounts, your contributions go in tax-free. Yes, you’ll have to pay taxes on whatever money you withdraw when you’re retired, but since you’ll no longer be working, your income, and thus your tax rate, will probably be lower than it is today — not to mention you’ll earn a return on the money that you would have otherwise paid in tax. Relatedly, whatever money you contribute lowers your taxable income in the eyes of the feds, so if you make $90,000/year but put $20,000 into an RRSP, you’ll be taxed as if you made only $70,000. (A couple of caveats: you’d probably be wise to pay off your high-interest debts and build an emergency fund before you do any sort of investing; and a TFSA account might be better for some folks than an RRSP.) 2. Only using your RRSP. Many personal-finance pros suggest socking away 20% of your after-tax income (which we realize might be ambitious; do the best you can) to reach your retirement goals. If you’re making a salary well into the six figures, first of all, congrats. Second of all, be aware that it’s possible to max out your annual RRSP contribution limit without hitting that 20% figure; if that’s true for you, you’ll probably want to invest in a second investment account if you’re able to. (In this story, we illustrate that if you tried to save $700,000 to retire early, you’d fall short of that goal if you didn’t save above and beyond your annual RRSP contributions.) But before you do anything else, max out whatever rollover contribution room you might have in your RRSP, since it’s tax advantaged. 3. Missing out on free money from your job. By some estimates, half of Canadian employees who do contribute to an RRSP fail to take full advantage of retirement “matching” contributions offered by their employers. How these matching plans typically work is that for every dollar you contribute to your RRSP, your company will contribute the same amount up to 3% to 5% of your annual salary. If you don’t contribute enough to get your full match, you’re leaving money on the table. 4. Waiting until the last minute to invest. Contributions to an RRSP have to be made by the end of February if you want to deduct them from your previous year’s taxable income, which means a lot of RRSP contributions are made hastily in … late February. Financial advisers say that this often results in poor investment decisions, since time-crunched people tend to buy a hodgepodge of assets that aren’t the right mix for their investing goals. The good news is that it’s August, which means you’ve got time to figure out your ideal portfolio allocation. Another huge reason not to delay: the longer your investments are in the market, the more time they have to grow. Vanguard has found that this is likely the best approach over time. 5. Loving Canada too much. By one estimate, the average Canadian’s equity portfolio is made up of 52% Canadian stocks — even though our companies only make up 3% of the global equity/stock market. If you’re guilty of this so-called home-country bias, you risk being overexposed to the Canadian economy in the event of a downturn. Vanguard suggests that Canadians should hold 30% domestic stocks and 70% foreign stocks, along with some foreign bonds. You can be overexposed in other ways too if you, say, invest heavily in an S&P 500 index fund and a NASDAQ index fund, which hold many of the same large tech companies. It’s best to diversify geographically and by sector and by asset class. We talk all about this here. —Ben Mathis-Lilley OTHER VERY GOOD READS 🛒 How Costco Hacked the American Shopping Psyche* It attracts customers with more than just savings. | The New York Times 👨‍💻 The Terrifying Rise of Ransomware Gangs And how ill-equipped Canada is to fight back. | Maclean’s 🤑 A Six-Step Financial Plan for Every Canadian Essential money steps no matter your age or stage. | Wealthsimple Magazine *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. POSTS OF WISDOM The secret to a happy life is hopping on calls and 5 A.M. cold showers. THOUGHTS ON TODAY’S ISSUE? Love it Good So so This week’s newsletter contributors: Ben Mathis-Lilley (writer), Devin Gordon (writer), Stacey Woods (writer), Sarah Rieger (news writer), Ambrose Martos (fact checker), Ciara Rickard (copy editor), Clare Douglas (copy editor), Sara Black McCulloch (fact checker), Mohini Tailor (lifecycle marketing manager), Matthew Karasz (markets editor) Jared Sullivan (senior editor), Peter Martin (senior editor), Kat Angus (managing editor), and Devin Friedman (editor-in-chief). Wealthsimple Media Inc. 80 Spadina Ave Suite 400 Toronto, ON, M5V 2J4 Replies to this email address are not monitored. Have questions? Visit our Help Centre or submit a request to our Client Support team. 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